By letter dated October 24, 2001, your have asked the following question:

Provided State funds are available and a State employee meets the age and length of service requirements set forth in N.C. Gen. Stat. § 143-27.2, can the State Budget Officer approve discontinued service retirement allowance (“DSR”) when the agency head of the employing agency does not recommend (and approve) DSR?

Stated simply, the answer to your question is no.

N.C. Gen. Stat. § 143-27.2(a) states, in pertinent part:

When the Director of the Budget determines that the closing of a Stateinstitution or a reduction in force will accomplish economies in the StateBudget, he shall pay either a discontinued service retirement allowance orseverance wages to any affected State employee, provided reemploymentis not available. . . . In determining whether to pay a discontinued serviceretirement allowance or severance wages, the Director of the Budget shallconsider the recommendation of the department head involved and anyrecommendation of the State Personnel Director. Severance wages shallnot be paid to an employee who chooses a discontinued service retirement.Severance wages shall not be subject to employer or employee retirementcontributions. Severance wages shall be paid according to the policiesadopted by the State Personnel Commission.

Notwithstanding any other provisions of the State's retirement laws, anyemployee of the State who is a member of the Teachers' and StateEmployees' RetirementSystem or the Law-Enforcement Officers' RetirementSystem and who has his job involuntarily terminated as a result of economies

David T. McCoy November 7, 2001 Page 2

in the State Budget may be entitled to a discontinued service retirement

allowance, subject to the approval of the employing agency and the

availability of agency funds. . . . .

The first paragraph quoted above requires the State Budget Officer to consider the payment recommendation of the employing agency head and the State Personnel Director, but does not require the State Budget Officer to accept the recommendations of either. However, the second paragraph provides that the State Budget Officer cannot select DSR without the express approval of the employing agency. Notwithstanding the discretionary selection language, N.C. Gen. Stat. § 143-27.2 (a) clearly requires that a State employee subject to a reduction in force (“RIF”) receive either DSR or severance wages upon termination.

Therefore, while the State Budget Officer has the discretion to accept or reject the recommendations and select which type of payment a State employee subject to a RIF will receive upon his or her termination from employment, the DSR selection requires the approval of the employing agency head.

In summary, the State Budget Officer cannot select DSR unless the employing agency head has approved the payment of DSR. The State Budget Officer may select severance wages even if the employing agency recommends and approves DSR.

Should you have additional questions concerning this advisory opinion, please give us a call.